In exchange for pleas, jail time to be trimmed

The lead defendant in the $60 million fraud case at Rent-Way Inc. faces eight to 14 months in a federal prison.

The co-defendants of Jeffrey Conway likely will face shorter sentences.

The government worked out the possible sentences for Conway and the co-defendants during the six months of negotiations that ended with the three pleading guilty in U.S. District Court in Erie on Tuesday.

The length of the possible sentences for each of the defendants is based on their level of cooperation, their guilty pleas, lack of prior records and other factors, according to the federal sentencing guidelines, which Congress sets.

Each of the defendants initially faced maximum sentences that were much higher than the sentences they are now facing as a result of their pleas.

n Conway, Rent-Way's former chief financial officer and president, pleaded guilty to conspiracy to falsify Rent-Way's books and records. He initially faced a maximum of five years in prison.

Conway, 45, now lives Mandeville, La., north of New Orleans. He already has agreed to pay the Securities and Exchange Commission fines and costs of nearly $360,000, and he faces more fines.

n Jeffrey Underwood, Rent-Way's former senior vice president of operations, pleaded guilty to a charge of falsifying books. He faced an initial maximum sentence of 10 years. Underwood, 47, lives in Bradenton, Fla.

The length of the potential sentences for Marini and Underwood remain undetermined. But their sentences will be less than Conway's, said U.S. Attorney Mary Beth Buchanan of Pittsburgh.

U.S. District Judge Sean J. McLaughlin accepted the pleas and set sentencing for the three defendants for Nov. 6. He released each of the three on unsecured bonds of $20,000.

Buchanan said investigators considered Conway the most culpable of the defendants because he headed the conspiracy. She and other officials also said Marini and Underwood cooperated with investigators, but that Conway did not.

Through his guilty plea, "Conway accepted responsibility for his conduct, but he did not cooperate in the investigation," said Assistant U.S. Attorney Marshall Piccinini, the chief federal prosecutor in Erie.

The government also gave Conway credit for voluntarily resigning from Rent-Way and accepting responsibility in a timely manner, according to court records.

Buchanan and Piccinini said the government's investigation into Rent-Way is closed. They said the FBI, which launched a criminal investigation, and the SEC, which launched a civil probe, found no evidence that other company officials were part of the fraud.

The SEC's investigation characterized Conway as the ringleader of an effort to manipulate Rent-Way's books to bolster the company's position on Wall Street from the fall of 1998 through October 2000.

"Conway told Marini that they could both lose their jobs if the company did not meet earnings targets," according to the SEC's civil complaint.

"Conway told Marini to do whatever needed to be done to meet the company's earnings targets, but not to disclose to Conway what steps he would take to accomplish that goal. Conway explained that since he (Conway) was an officer of the company, he needed to maintain 'plausible deniability' — that is, the ability to deny direct knowledge of illegal conduct — and therefore could not be told the details of Marini's actions."

Conway, Marini and Underwood each face fines in their criminal cases. The maximum possible fine for Conway is $250,000. The amount is $1 million each for Marini and Underwood, although Buchanan said Conway would end up paying the largest fine.

In addition, the three defendants each agreed to judgments to end the SEC civil case.

n Conway agreed not to violate antifraud and financial reporting laws in the future; accepted a lifetime ban from serving as an officer or director of a public company; agreed to pay $129,350, which represents the amount of money he avoided losing by selling Rent-Way's stock before the company publicly disclosed the accounting irregularities; agreed to pay $30,067 in interest; and agreed to pay a $200,000 civil penalty.

n Marini agreed not to violate antifraud and financial reporting laws in the future, and he accepted a lifetime ban from serving as an officer or director of a public company. The SEC still must determine his civil penalty.

n Underwood agreed not to violate financial books and records laws in the future, and he agreed to pay a fine of $25,000.